The Amazing Paradox About Wages and Productivity

For good or for bad, since I was born, I live in Greece. All misery, poverty and unemployment aside, this is a really beautiful country to live in. I cannot really say, I have travelled around the whole world (Las Vegas still eludes me) and I have been in a few places up until now in order for me to be able to compare. Greece has a lot of natural beauties such as gorgeous islands, magnificent beaches, and outstanding landscapes to admire.

From a financial point of view though, it really is a nightmare for anyone who is paid from Greece (luckily this isn't my case). I consider myself privileged to be able to live in such a nice country, while I get paid from abroad. This gives me the power to spend my *hard-earned money* in such a poor but at the same time cheap and beautiful country to live.

Zakynthos, Greece, Navagio Beach

Well, if we really want to be honest, poverty is such a popular topic in the evening news, that it tends to get big traction exactly because it "sells". I am not saying things over here are cherry red, but rich people still do exist and know how to spend their money around here.

Geo-arbitrage in Greece which is a very popular way of living today, is highly recommended. I invite you all to stop by for a short vacation to witness for yourselves all the things described here.

Lower wages increase productivity

This is one of the most common lines, I keep hearing on evening news, local cafes, or even on the street amongst common people. They all keep saying that lowering average wages on a nationwide scope would kill productivity.

If you had swollen the blue pill of social programing like I did, that would make you mad to hear. Where is the logic in this I wondered, thousands of times. How is this going to help? Thank god I was not alone. My fellow average stupid civilians had the same opinion as me. Lowering wages on public and private sector would kill productivity. The same story on news as well. Same thing again and again.

If you really think about it, it makes perfect sense doesn't it? Who would work more if his wage was cut by a big chunk? Nobody. At first, it makes sense. But let's see this more closely.

This is why I call it, the paradox of wages and productivity.

And then it hit me...

But of course, how stupid could I be? How is it possible not to see such an obvious thing. Unfortunately, for most of us who are unlucky enough, to not have a proper real life education, this idiotic nonsense sounded logical.

The truth is 100% the other way around though. Like the heading above says, in reality, lower wages increase productivity. Sad but true.

The idea for this article came to me when I was really struggling to explain this to a friend of mine the other day (because at first seems unreasonable), so I tried to elaborate more, with an example.

Imagine being George Nobody, working in a company for 3k / month. Unfortunately with this kind of income you don't live like a king exactly, but you survive, working your ass off for about 8 hours a day. Now imagine this. Your boss comes and with tears in his eyes announces to all staff, that wages will drop by 25% in order for the company to survive this economic crisis, overcome capital controls etc.

Bang, that's it. You just lost 750$ every month. It might not be the end of the world, but it is a big chunk of your coin nonetheless. Here comes the part where you have to choose your next step. As a good friend of mine used to say, there are always three options.

Option #3: Give your boss a fake smile, say "OK Boss", stay put and look for an extra job to make up for it.

Yep that's it. No more options lads. And guess where the magic happens? If you answered option 3, my cat is a bit happier now.

Some time has passed and our friend George, has found a part-time job for 2-3 hours per day and now he is back to the original 3k, he proudly used to earn before.

Some people will simply quit and some others will stay without looking for an extra job. But some of them (my guess is the majority) will keep their job, while at the same time look for an extra job to make up for the lost income.

You see where I'm going with this? In order for George to make up for the lost 750$, he will have to put an extra effort. For the same amount of money, George now works an extra 2 hours a day. Is there anyone to disagree he is more productive?

I guess not. George has to "produce" more, in order for him to earn the same amount of money.

Multiply this by a whole economy and what do you get?

An overall increase in productivity.

Apply with caution

For this move to have any result, it needs to be applied on a large scale, steady and slow. It needs to involve all sectors of economy, both public and private. It needs to be coordinated. This is what has actually been happening in Greece for the last 3-4 years.

Since all wages and pensions have decreased by a lot (and simultaneously), people have started looking for alternative ways to make up for the loss of income. In my opinion, it is executed perfectly at the moment. I see this phenomenon everywhere.

As a side effect this gives the government and all the employers of the private sector an additional advantage. People are too tired, occupied and stressed to look for other opportunities that most of them are sucked up by the system. They compress as mush labor hours as they can in order to survive. Nobody has the energy, the time or the will power to look for something better, or god forbid, to create something big.

The system is designed in such a way (evolutionary speaking), that only the most capable will survive and thrive. There is no room for average people on the train to moneyland.

Wake up and take action

Even if your government or the company you work for, decided to squeeze you in order for them to expand, it is in your hand to overcome this and find your way out of the rat race.

You are 100% responsible for your failure or your success. You cannot blame the weather, your mother or god if you are lazy, broke or fat. In this blog, we have already given some solid advice. Start reading all the posts, the books proposed and take massive action to some specific direction...NOW!

Every day that passes, is one more day you lost being rich. It is one more day you lost being independent. It is one more day you lost being FREE.

Fairies don't exist (at least I have not seen any up untill now), government or your beloved boss don't really give a fuck about you. Cry as loud as you want, wages won't go up again. The government won't return the money they took away from you and the sky won't turn blue because you like it that way.

Be proactive and try to keep your job, while at the same time, try to build a business unit of your own. It won't really matter what this is, as long as it is easily scalable. You will have better chances if this business is Internet-based and NOT location-based.

Some very popular examples of business ventures that scale easily without having much capital to invest in are:

Blogs

E-commerce sites

Web-based services sites

More on specific business types will be explained in future posts. For now, try to clear your head from all this poisoning. You and YOU ALONE are responsible for your success. This is a good thing after all. Imagine if a 3rd cousin of yours, was responsible for your success. That would really suck, wouldn't it?

*As a sidenote, logic in this article applies in every economy imaginable. So the principles described in the situations above are not country or nation dependent. They are world / economy dependent and they apply everywhere.